Panel - What's next for Asia's bond markets, The 10th Asset ASEAN Bond Markets Summit 2015, Singapore

Brief Event Notes: The 10th Asset ASEAN Bond Markets Summit 2015, Singapore 

 http://www.theasset.com/event/bond-asean


Global environment
·        Embrace the new normal, global growth rate of 3% pa. Global slowdown to continues coupled with an normalised China and declining commodity prices
·        Continuing volatility and uncertainty
     ·        Fundamentals continue to deteriorate across EMEA and showing signs of continuing in 2016
·        Divergence in monetary policies of EM and DM; US interest rate hikes will require EM and EU to stimulate local economies by reducing rates
·       Most Asian (and emerging) market economies will have to restructure and open up
·       Companies will have to review functional currency think of CNY as their functional currency
·       Managing rate hikes or interest rates: pass on the cost to your customers, hedge for long term debt. Keep all options to raise funds including structured funding opportunities whilst cost may be irrelevant?

Approach to investing in 2016:
·        ·      Infrastructure push by Asia Infrastructure Investment bank and Japan bank of international cooperation. Initiatives will predominantly support suppliers in China and Japan and infrastructure development in Asia
·        Growth region – India, Indonesia, Indo China and New Silk Road (one belt policy)
·       Most issuance from Singapore, HK, China, India, Indonesia
·       Local currency issuance in local markets will increase
·       Issuances: (i) Quasi sovereign, sovereign and bank issues as NPA’s stabilise and government recapitalise the banks, (ii) infrastructure and telecom, and equipment’s, (ii) renewable energy.

Ratings perspectives:
·        ·     Ratings will be under stress and agencies will under stress
·        ·     Default risk perceptions or news will increase
·        ·     Watch out for companies with (i) unhedged $ debt or no exposures to US$ export flows, (ii) stress on refinancing of debts.

Development in Asia bond markets
·       ·      Investors market – investors will be choosy on credit quality, shorter tenor and pricing. Credit risk premiums will be on the rise as investors will be demanding
·       Issuers will issue where there is liquidity pool and swap LCY exposures in their functional currency
·      Competition from bank deposits, AIIB/JBIC and suppliers credit from Chinese banks. Infrastructure lending in EM markets may help develop infrastructure and spur growth in EM's
·      Indian external commercial borrowing (flexible rules makes it a good alternative to bond markets)





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